Homebuilders youthful leadership bucks national trends

If you belong to any number of civic or professional organizations along the Outer Banks, the answer to this abbreviated Beatles verse might well be an unqualified “yes,” as it is the older members who continue to hold office and keep the flame burning.

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But for the Outer Banks Homebuilders Association, the younger generation appears to be bucking a national trend that has seen Gen Xers and subsequent generations eschew joining the traditional clubs (Rotary, Kiwanis, Lions) and professional organizations (Realtor’s Associations, Chamber of Commerce) that once comprised the backbone of communities, along with churches and youth sports.

For the past two years, the top leadership of the Outer Banks Homebuilders Association has been led by a group of individuals where the youngest member is 31 and the senior officer is only 42.

They have taken over while working side-by-side with their long-term, older members, creating a unique situation in the age of “Bowling Alone.”

Many local clubs and organizations would be happy to have a leadership cohort where the next generation is stepping up and exercising the reigns of leadership.

According to Maxine Rossman, executive director of the OBHBA, they achieved this facelift by design, not happenstance. She credits the North Carolina Homebuilders Association with pushing the idea of transitioning to the next generation at “every meeting, seminar, and forum we attended.”

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The NCHBA is recognized as one the best-organized homebuilders associations in the country, and they’ve been very effective lobbyists on behalf of the residential construction industry and their clients-present and future homeowners.

“They emphasized that if we wanted to remain a force, we needed to involve our younger members in leadership roles. We followed their advice,” Rossman says.

Outgoing president Jake Overton also gives credit to long-time OBHBA leaders such as Dave Stormont and Duke Geraghty “for coming to members like myself, when we were young, and telling us the need for a transition plan that included our generation.”

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Overton was the first of the under 45-crowd to become president of the association.

Lessons learned

These new leaders represent two distinct groups. Some are second- and third-generation members of families involved in construction and related trades, while the remainder started their own businesses at relatively young ages and are now in a position to expand their efforts and lend their experience to the broader needs of representing an entire industry before the public and government officials.

Jake Overton just completed his second term as OBHBA president and has now handed the reigns over to Matt Neal.

While young, for the most part, the new group of leaders was already working in the homebuilding field when the housing and economic crisis of 2005 came crashing down on the region.

Regardless of their prior experience in the field, none of them or their older mentors had ever seen a housing downturn as severe as the Great Recession.

The fact all of them were seated around a table for this article indicates another attribute of this generation — they’re survivors that in no way represent the “entitled” pejorative often used to describe millennials and Gen Xers.

The first question we posed to them was, given their relative youth when the crisis struck, are they operating their businesses differently than their parents and the previous generation of homebuilders?

Jake Overton recalls that in his family business, they went from building custom homes and creating entire developments to doing “anything we could, remodels, metal buildings, whatever put food on the table.”

That lesson has stuck with him in keeping his business focused and more risk-averse.

Jonathan Daniels, whose family roots run deep along the Outer Banks, from Daniels Homeport all the way back to the original Ben Franklin store, remembers family discussions about “cutting the fat out of the business” and what that meant in terms of employees and witnessing their customer base shrink.

Daniels owns Full Tilt Blinds & Shutters, so this Outer Banks business owner continues another family tradition–creating a new business venture for a new generation.

Nathan Neal, of Cozy Kitchens, saw a fire destroy their family business in 2004, just before the crash provided a double hit. “We had to keep going, there were over twenty employees depending on us.”

Matt Neal simply said, “We didn’t have any other choice but to keep going.”

As a result of the hardships, all of them said they pay more attention to ongoing costs this time around and keep in mind how quickly things can change.

They also appear to be more risk-averse when it comes to borrowing money and engaging in speculative ventures, and many are seeking clients where their skills add value (and profit) to a transaction, a quality over quantity approach to business.

Attracting a different high-end buyer

Which segues nicely into another area where they see some differences with the older generation of builders.

We asked where they thought the market was going in terms of what the clients wanted and what they wanted to build.

Whether general contractors, “subs” or retail/wholesale suppliers, the new breed view themselves as craftsmen rather than merely builders, and are more apt to build what their customers want, rather than offering a “take it or leave it” commodity product that is common in suburban areas.

Matt Neal, of Neal Contracting, was just installed as the new OBHBA president.

He looks at the high-end developments that spread like wildfire in the 90’s and 00’s as a product of that particular era- — the rental machine model — that he and the others feel may not be right for their skills or the overall market.

“Face it, we were building $1 million tract homes. They weren’t custom homes in any true sense of the word.”

It’s not that they disdain or disapprove of the housing that came before; it’s just not their style.

Instead, they see a new high-end market with different buyers who seek builders with unique skill sets that differ from what came before.

Which translates into a lack of real enthusiasm for replicating the type of construction seen in Pine Island or Monterey Shores.

Nor do they appear keen to build the mega homes and “event homes” with 21 small bedrooms and bathrooms that dominate the landscape today and create controversy wherever they appear.

Robinson observed that in Raleigh, “people will spend $150,000 on the kitchen alone. Once you see buyers willing to spend that much on a kitchen, imagine what kind of home you’d get to build for them!”

All of the builders present that day envision a market with that type of client, the kind of buyer that aspires to own a Hamptons-style beach home that would serve as a true second home instead of a mini-hotel that generates rental cash flow.

In fact, a significant number of these young builders are skeptical that the market for rental homes is a model that can support as many builders as it did in the past. Hence the desire to find new buyers with different tastes and the chance to build different styles of second homes.

Most of them have done their homework, noting these well-to-do buyers are out there and buying homes in Wilmington, Atlantic Beach, and Raleigh.

They even feel these potential buyers are wealthy enough to tear down existing McMansions, replacing them with true custom homes where builders and subs will be paid for their expertise rather than their ability to quickly churn out huge homes that no one will ever really live in.

Workforce housing remains a priority

But don’t think these builders have forgotten the bread-and-butter forms of construction that house our local population.

Far from it.

But in a recurring battle that was fought by the previous generation, they see little hope governments on the Outer Banks will implement the required changes that would allow the “west side” residential housing to be built.

These rules, they say, which lead to higher land prices also require huge sections of lots set aside for septic systems, the lack of sewer, which limits density, and height restrictions. All of these regulations and codes combine to make it impossible to build multifamily dwellings, expand existing homes on small lots, or even perform extensive remodeling that costs more than 50 percent of a home’s value.

It also makes it difficult to earn any profit on lower-priced homes, even if one could acquire the permits to build them.

Jake Overton summed it up, saying, “We’ll keep fighting for it, but lower-priced, Joe Worker on the Outer Banks will wind up living west or north of the area, not on the Outer Banks itself.”

All of which means the younger generation of builders may not be able to rely on the same middle-class customer base that served the older generation well — a local client who went back to the same builder for their starter home, a second home as the family grew and even a retirement home.

Instead, builders who want to construct homes for locals will likely be serving retirees and the few middle and upper-middle-class buyers who can afford houses costing $350,000 or more.

“At lower prices, you just can’t make money as a custom builder,” Overton laments.

Seeking better relations with local government

But not all of their dealings with zoning ordinances and building codes are seen as negative encounters.

In fact, the “Young Guns” believe they have built on improving relations with municipal and county governments, a process that started with the prior generation.

“We don’t see ourselves as adversarial and we try to be proactive advocates for all parties — government officials, builders and ‘subs’, and the homebuyer. Anything that slows the process down reflects on us in the clients’ eyes, so creating a smoother process benefits everyone” Robinson notes.

They’ve asked municipal and county officials to come to them first when contemplating changes to the code so “we can ask them what their end game is and we can help them get there more directly and with cleaner, easier to understand ordinances,” Robinson told us.

The plan seems to be working in most towns, and they cited positive feedback from officials when the OBHBA worked with local governments on the soon-to-be-released flood maps, which will take many homes out of more expensive flood zones, while still leaving structures at risk for flood damage.

“We went to the towns and said, ‘we want to be responsible here and build to standards that meet or exceed what is required by these maps,’ ” Neal said.

That approach was so well received, local town planners felt they could work with the OBHBA on other issues

Nathan Neal of Cozy Kitchens represents the second generation in the family business and another young face in the OBHBA leadership circle.

, such as height restrictions.

Overton cites one issue that was front and center then and continues now — working with planning departments, zoning ordinances, and elected officials across six municipalities and two counties.

“We still have to deal with all of them, but in some ways, I think our approach has changed,” says Overton.

“We’ve tried to take what our predecessors had started to do, working with, rather than against these departments and officials and become even more proactive.”

Vaughan Robinson, of Coastal Cottage Contracting, agrees. “We try to ask them how we can help them get to what they want when they propose changes in codes. What is their end game? Often they don’t know the terms or the ramifications of proposals, so we can help them take a more direct path, using cleaner and more technically correct language, and in the process, benefit the industry and the client while allowing them (planning and zoning officials) to achieve their goals.”

Matt Neal, the owner of Neal Contracting, said the Homebuilders has tried to become advocates in working with government officials and it seems to be paying off.

Overton cited work by Willo Kelly and his father, Jay Overton, with the town and county officials on the new flood maps, which will take many homes out of more expensive flood zones while leaving them at risk for flood damage.

He also credits Kelly with being an excellent bridge between the OBHBA and the town and county officials they need to work with as she is in front of them on so many issues much of the time.

Robinson chimed in: “We wanted to be responsible in the manner we worked with the towns to ensure what we build meets or exceeds the standards the new flood maps indicate are needed in such zones.”

Several planners told the OBHBA that the process went so well, they wanted to try to replicate the success achieved with the flood maps in working on issues such as building heights and other matters.

One final difference between then and now we discussed was the disappearance of middle-class buyers in the market, which again relates to all of the obstacles in the way of building workforce housing.

“We’re seeing people at two extremes,” says Blair Meads, owner of Reliant Construction.

“They are either in a position where money is not really a problem, or they are barely able to put together the loans and funds to build their first house,” he says.

This is another difference between the young and older generation of builders.

“We want to build their first, second, and even third and final home, just like our fathers did,” Overton says.

But with the cost of building so high here, most of the builders at the table don’t see that tradition continuing.

As we expected, the issues faced by this young cohort are a mix of new situations unique to their generation, as well as old issues such as affordable housing and onerous regulations.

But the difference between the OBHBA and many other local organizations is that the young members are stepping up to the plate.

Other organizations and even town boards and commissions could take a page from the OBHBA playbook and breathe some new life into the organizations that will lead us into the middle of the 21st century and beyond.

It’s good to see that OBHBA is thinking critically about what the recent flood map changes may mean for homebuilding. If new homes are built on parcels that used to be in a flood zone, but no longer are, reduced standards are likely to cause lots of regret down the road. It’s clear that political pressure will increase to penalize homeowners with repeated flood claims.

FEMA makes clear in its information that “more than 20% of all NFIP flood insurance claims come from properties mapped outside of the high risk flood areas.”

What a lot of builders are not considering is that 90% of people that move here to get away from the crowded neighborhoods and fast pace!. I do not think that the builders have the OBX as there priority but how to make more money faster then move away! Most of the Towns have stable Govt. with Older and younger members that are trying to look out for what’s best for the Towns that they represent. Mostly all housing was affordable until the big Mini Hotels started!

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